By developing its own e-commerce search engine, Walmart aims to drive more online sales.
Walmart is getting into the search business, to compete not with Google but with e-commerce nemesis Amazon.
On Thursday, the global retail giant introduced Polaris, a search engine developed by its @WalmartLabs group, to provide online shoppers with more relevant responses to queries entered at Walmart's website.
Neil Ashe, president and CEO of Walmart global e-commerce, in a statement characterized search as "a crown jewel for any e-commerce company to own" and presented Polaris as proof that the company is committed to "owning technology that is fundamental" to serving its customers.
Amazon knows the value of search only too well. Though its internal search initiative, A9, could not compete with Google as a stand-alone search site, the company has employed its A9 search technology to good effect internally. Amazon's quarterly revenue growth has averaged almost 40% for the past two years, largely due to its e-commerce strength.
Walmart, which reported 2012 sales of $444 billion, is growing about five times more slowly than Amazon and only generates about 2% of its revenue from e-commerce. The company's underwhelming e-commerce performance was addressed by CEO Mike Duke in the company's second quarter fiscal year 2013 conference call for investors in mid-August.
"We've been focused on stepping up the intensity of our global e-commerce opportunity," said Duke, noting that recruiting talent in Silicon Valley has become easier as the work of @WalmartLabs has become known. "...Our goal is to have a deeper relationship with our customers to drive greater loyalty and e-commerce is key to that strategy. We're also constantly driving innovation. We're building a new global platform to take our assortment and services to every one of our markets simultaneously."
That's probably a wise move if Forrester Research's predictions prove accurate. The analysis firm projects that online shopping in the U.S. will generate $327 billion in 2016, an increase of 45% from $226 billion in 2012. It also expects that by 2016, e-retail sales will account for 9% of all retail sales, up from 7% in both 2012 and 2011.
Walmart signaled its intention to improve its product search in April when it announced plans to acquire Kosmix, a social media company focused on e-commerce. Kosmix was folded into @WalmartLabs, the retailer's online commerce division.
Sri Subramaniam, former VP of engineering at Kosmix, was installed as a VP at @WalmartLabs and became the head of the Polaris initiative. He describes Polaris as the beginning of an effort to "accelerate Walmart's global e-commerce efforts."
Polaris utilizes what's known as "semantic search." The system does not merely match keywords to terms in a static index. Rather, it attempts to decipher the meaning of queries. For example, a search for "denim" would return e-commerce listings for jeans because "denim" and "jeans" are related concepts.
Any good search engine does this to some extent, but semantic capabilities are particularly useful for e-commerce search because queries don't have to match product keywords exactly to be presented and potentially drive a sale.
Polaris is based on Kosmix's Social Genome project, which monitors online social interactions and uses that information as business intelligence. For instance, it gathers signals about products likely to be successful at specific retail locations.
Customers may not notice the presence of Polaris at walmart.com. There's no visible sign announcing the new search engine. But Walmart has noticed. The company says it has seen a 10% to 15% increase in shoppers completing purchases for products found via search queries entered on its website.
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